Land tax of up to 4.65 per cent hits foreign farmland investors in Queensland

A new rural land tax surcharge in Queensland will hit foreign investors hard, and farming bodies are divided on their stance.

Foreign companies will have to pay more than 4 per cent of their Queensland properties’ unimproved capital value in land tax each year.

Foreign companies investing in Queensland are being slugged a 2 per cent land tax surcharge on the unimproved capital value of their freehold farm land – equal to $380,000 a year on a $10 million property.

The surcharge was introduced in June 2019, but deferred twice by Annastacia Palaszczuk’s Government, before finally being introduced this financial year.

Other states are yet to follow suit, with NSW and Victoria only applying their 2 per cent foreign land tax surcharges to residential properties.

Land tax surcharges in each Australian state imposed on foreign property owners

Growth Farms Australia director David Sackett, who works with major overseas investors, said Queensland’s land tax surcharge was a “stupid idea” and acted as a major impediment to his clients investing in the sunshine state.

“If Queensland wants to attract foreign capital in agriculture, then they’re making it much less attractive for people to invest,” Mr Sackett said. “It takes 70 basis points to one per cent off annual returns.”

The surcharge was not instigated by Queensland farmer lobby AgForce, whose spokeswoman said it did “not have a formal position on the application of a 2 per cent land tax foreign surcharge”.

“AgForce is not opposed to commercially motivated foreign investment in agriculture, and supports the current land tax exemption for agriculture,” the spokeswoman said.

“Given the flow on benefits of foreign investment in agriculture to our industry and local communities we also support the existing “significant contribution” exemption being applied.”

The Weekly Times asked the NSW Farmers Association leadership if it supported foreign entities paying land tax on farm land, given all primary production land is currently exempt, no matter who owns it.

NSW Farmers President James Jackson said “generally, NSW Farmers does not support a land tax for domestic purchases of agricultural land,” but he did not answer the question on foreign entities.

“Our policy centres on the establishment and maintenance of public registers of foreign investment in agricultural land, water and food producing infrastructure … and that tax is paid at Australian domestic tax rates by all foreign investors and that any dividend shifting or transfer pricing by them be disallowed.”

As in other in other states and territories Queensland farmers remain exempt from paying land tax.

But any foreign corporation or individuals with a direct or indirect interest in rural Queensland properties faces a land tax bill of up to 4.65 per cent of its unimproved capital value, which usually range from 30 to 50 per cent of a property’s market value.

Queensland has introduced an exemption where foreign companies can prove they are making a significant contribution to the state, such as employing 75 or more locals or spending $20m or more annually on wages, state taxes, local goods and services.

Cotton Australia general manager Michael Murray said he knew of one foreign investor in his industry who had gained the exemption, but who would have to reapply next year.

As for new investors Mr Murray said “if they’re looking where to buy, there’s a 4 per cent land tax in Queensland and no tax in NSW”.

As for those foreign companies already established in the sunshine state Mr Murray said the prospect of having to pay say $200,000 in land tax, may force some to look at making savings by “putting off some of the ordinary Queenslanders who work for them”.